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iogann1982 [59]
3 years ago
13

Under the terms of his salary agreement, president Steve Walters has an option of receiving either an immediate bonus of $77,000

, or a deferred bonus of $98,000 payable in 10 years.
Ignoring tax considerations and assuming a relevant interest rate of 4%, which form of settlement should Walters accept?
Business
2 answers:
In-s [12.5K]3 years ago
8 0

Answer:

Immediate bonus of $77,000

Explanation:

Given the following

Immediate bonus = $77,000

Differed bonus = $98,000

Rate = 4%

Duration = 10

$66,205 deferred bonus

$77,000 immediate bonus

Calculating the differed bonus

We have

=$98,000 x 0.67556= $66,205

Present value of deferred bonus

= $66,205

He has a choice of collecting either an immediate bonus of $77,000, or collect a deferred bonus of $66,205 payable in 10 years

The best option for Walters is to collect an immediate bonus now

gulaghasi [49]3 years ago
5 0

Answer:

$66,205 deferred bonus

$77,000 immediate bonus

Explanation:

$98,000 discounted at 4% for 10 years

=$98,000 x 0.67556= $66,205

Present value of deferred bonus $66,205

Walters has an option of receiving either an immediate bonus of $77,000, or a deferred bonus of $66,205 payable in 10 years

Therefore Walter should accept the bonus of $77,000 now.

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Answer:

The correct answer is letter "A": managerial mistakes or self-interest.

Explanation:

Leveraged buyouts or LBOs carry a mixed image in the corporate world. An LBO is a way to buy a business with funds that are almost entirely lent by loans or bonds. Under certain instances, the company's properties being borrowed are used as collateral for the loans. That allows companies to make major acquisitions without investing a lot of money.

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Which of the following is a service-based business? (Select the best answer.)
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A house cleaning company 
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3 years ago
American​ Exploration, Inc., a natural gas​ producer, is trying to decide whether to revise its target capital structure. Curren
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Answer:

a) 9.00 %

b) 7.80 %

c) yes the weight of the debt increases here is more risk in the investment as the debt payment are mandatory and failing to do so result in bankruptcy while the stock can wait to receive dividends if the income statement are good enough

d) 9.00  %

e) The increase in debt may lñead to an increase in return of the stockholders if they consider the stock riskier than before and will raise their return until the WACC equalize at the initial point beforethe trade-off occurs

Explanation:

a)

WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})

Ke 0.12

Equity weight 0.5

Kd(1-t) = after tax cost of debt = 0.06

Debt Weight = 0.5

WACC = 0.12(0.5) + 0.06(0.5)

WACC 9.00000%

c)

WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})

Ke 0.12

Equity weight 0.3

Kd(1-t) = after tax cost of debt = 0.06

Debt Weight 0.7

WACC = 0.12(0.3) + 0.06(0.7)

WACC 7.80000%

d)

WACC = K_e(\frac{E}{E+D}) + K_d(1-t)(\frac{D}{E+D})

<em>Ke 0.16</em>

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WACC = 0.16(0.3) + 0.06(0.7)

WACC 9.00000%

3 0
3 years ago
2 2 user: the cost to mail a package is $7 for the first 2 pounds and 30 cents for each additional ounce. which of the following
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7 0
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An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of var
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Complete Question:

An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is:

Group of answer choices

A) the safety of the principal invested.

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C) the yield is always higher than mortgage yields.

D) the yield is always higher than bond yields.

Answer:

B) changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices.

Explanation:

An important basic characteristic of common stocks that makes them a suitable type of investment for the separate account of variable annuities is changes in common stock prices tend to be more closely related to changes in the cost of living than changes in bond prices.

Generally, common stocks are considered by financial experts or broker-dealers to be a suitable type of investment of variable annuities because the prices of common stocks in the market are not fixed and as such they are affected by economical changes such as inflation or recession.

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